Enron
Encyclopedia
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp
and paper companies, with claimed revenues of nearly $101 billion in 2000. Fortune
named Enron "America's Most Innovative Company" for six consecutive years. At the end of 2001, it was revealed that its reported financial condition was sustained substantially by institutionalized, systematic, and creatively planned accounting fraud
, known as the "Enron scandal
". Enron has since become a popular symbol of willful corporate fraud and corruption
. The scandal also brought into question the accounting practices and activities of many corporations throughout the United States and was a factor in the creation of the Sarbanes–Oxley Act of 2002. The scandal also affected the wider business world by causing the dissolution of the Arthur Andersen
accounting firm.
Enron filed for bankruptcy protection in the Southern District of New York in late 2001 and selected Weil, Gotshal & Manges
as its bankruptcy counsel. It emerged from bankruptcy in November 2004, pursuant to a court-approved plan of reorganization, after one of the biggest and most complex bankruptcy cases in U.S. history. A new board of directors changed the name of Enron to Enron Creditors Recovery Corp., and focused on reorganizing and liquidating certain operations and assets of the pre-bankruptcy Enron. On September 7, 2006, Enron sold Prisma Energy International Inc.
, its last remaining business, to Ashmore Energy International Ltd. (now AEI).
Enron traces its roots to the Northern Natural Gas Company, which was formed in 1932, in Omaha, Nebraska
. It was reorganized in 1979 as the leading subsidiary of a holding company
, InterNorth
which was a highly diversified energy and energy related products company. Internorth was a leader in natural gas production, transmission and marketing as well as natural gas liquids and an innovator in the plastics industry. It owned Peak Antifreeze and developed EVAL resins for food packaging. In 1985, it bought the smaller and less diversified Houston Natural Gas
.
The separate company initially named itself "HNG/InterNorth Inc.", even though InterNorth was the nominal survivor. It built a large and lavish headquarters complex with pink marble in Omaha (dubbed locally as the "Pink Palace"), that was later sold to Physicians Mutual
. However, the departure of ex-InterNorth and first CEO of Enron Corp Samuel Segnar six months after the merger allowed former HNG CEO Kenneth Lay
to become the next CEO of the newly merged company. Lay soon moved the company's headquarters to Houston after swearing to keep it in Omaha and began to thoroughly re-brand the business. Lay and his secretary, Nancy McNeil, originally selected the name "Enteron" (possibly spelled in camelcase
as "EnterOn"), but, when it was pointed out that the term approximated a Greek word referring to the intestines, it was quickly shortened to "Enron". The final name was decided upon only after business cards, stationery, and other items had been printed reading Enteron. Enron's "crooked E" logo was designed in the mid-1990s by the late American graphic designer
Paul Rand
. Rand's original design included one of the elements of the E in yellow which disappeared when copied or faxed. This was quickly replaced by a green element. Almost immediately after the move to Houston, Enron began selling off key assets such as Northern PetroChemicals and took on silent partners in Enron CoGeneration, Northern Border Pipeline and Transwestern Pipeline and became a less diversified company. Early financial analysts said Enron was swimming in debt and the sale of key operations would not solve the problems.
, who was well acquainted with the burgeoning deregulated energy market Skilling wanted to exploit. In 1993, Fastow set to work establishing numerous limited liability
special purpose entities
(common business practice); however, it also allowed Enron to place liability so that it would not appear in its accounts, allowing it to maintain a robust and generally growing stock price and thus keeping its critical investment grade credit ratings.
Enron was originally involved in transmitting and distributing electricity and natural gas throughout the United States. The company developed, built, and operated power plants and pipelines
while dealing with rules of law and other infrastructures worldwide. Enron owned a large network of natural gas pipelines, which stretched ocean to ocean and border to border including Northern Natural Gas, Florida Gas Transmission
, Transwestern Pipeline
company and a partnership in Northern Border Pipeline
from Canada. The states of California, New Hampshire and Rhode Island had already passed power deregulation laws by July 1996, the time of Enron's proposal to acquire Portland General Electric
. In 1998, Enron moved into the water sector, creating the Azurix
Corporation, which it part-floated on the New York Stock Exchange
in June 1999. Azurix failed to break into the water utility market, and one of its major concessions, in Buenos Aires
, was a large-scale money-loser. After the move to Houston, many analysts criticized the Enron management as swimming in debt. The Enron management pursued aggressive retribution against its critics, setting the pattern for dealing with accountants, lawyers, and the financial media.
Enron grew wealthy due largely to marketing, promoting
power, and its high stock price. Enron was named "America's Most Innovative Company" by Fortune
for six consecutive years, from 1996 to 2001. It was on the Fortunes "100 Best Companies to Work for in America" list in 2000, and had offices that were stunning in their opulence. Enron was hailed by many, including labor and the workforce, as an overall great company, praised for its large long-term pensions, benefits for its workers and extremely effective management
until its exposure in corporate fraud. The first analyst to publicly disclose Enron's financial flaws was Daniel Scotto
, who in August 2001 issued a report entitled "All Stressed up and no place to go", which encouraged investors to sell Enron stocks and bonds at any and all costs.
As was later discovered, many of Enron's recorded assets and profits were inflated or even wholly fraudulent and nonexistent. Debts and losses were put into entities formed "offshore" that were not included in the firm's financial statement
s, and other sophisticated and arcane financial transactions between Enron and related companies were used to take unprofitable entities off the company's books.
Its most valuable asset and the largest source of honest income, the 1930s-era Northern Natural Gas, was eventually purchased back by a group of Omaha investors, who moved its headquarters back to Omaha, and is now a unit of Warren Buffett
's MidAmerican Energy Holdings Corp. NNG was put up as collateral for a $2.5 billion capital infusion by Dynegy Corporation
when Dynegy was planning to buy Enron. When Dynegy looked closely at Enron's books, they backed out of the deal and fired their CEO, Chuck Watson. The new chairman and head CEO, the late Daniel Dienstbier, had been president of NNG and an Enron executive at one time and was forced out of Enron by Ken Lay. Dienstbier was an acquaintance of Warren Buffett. NNG continues to be profitable today.
It was also an extensive futures trader
, including sugar, coffee, grains, hog, and other meat futures. At the time of its bankruptcy filing in December 2001, Enron structured into seven distinct business units.
Enron manufactured gas valves, circuit breaker
s, thermostats, and electrical equipment in Venezuela through INSELA SA, a 50–50 joint venture with General Electric
. Enron owned three paper and pulp products companies: Garden State Paper, a newsprint mill; as well as Papiers Stadacona and St. Aurelie Timberlands. Enron held a controlling stake in the Louisiana-based petroleum exploration and production company Mariner Energy.
, in 1997. Rebecca played a major role in the development of the Dabhol project in India, Enron's largest international endeavor.
, Bolivia, Colombia
, Mexico, Jamaica
, Venezuela, and across the Caribbean
.
. Around 1992 India came to the United States to find energy investors to help India with its energy shortage problems. Many companies were wary of doing business with India
; Enron was not. In December 1993, Enron inked a 20-year power-purchase contract with the Maharashtra State Electricity Board
. The contract allowed Enron to construct a massive 2,015 megawatt power plant. Construction would be completed in two phases and Enron would form its own power company to help manage the plant, the Dabhol Power Company
. The power project was the first step in a $20 billion scheme to help rebuild and stabilize India's power grid. Enron, GE
(who was selling turbines to the project), and Bechtel
(who was actually constructing the plant), each put up 10% equity
.
In 1996 when India's Congress Party was no longer in power, the Indian government assessed the project as being excessively expensive and refused to pay for the plant and stopped construction. The Maharashtra State Electricity Board (MSEB), the local state run utility, was required by contract to continue to pay Enron plant maintenance charges, even if no power was purchased from the plant. The MSEB determined that it could not afford to purchase the power (at Rs. 8 per unit kWh) charged by Enron. The plant operator was unable to find alternate customers for Dabhol power due to the absence of an open free market in the regulated structure of utilities in India. From 1996 until Enron's bankruptcy in 2001 the company tried to revive the project and spark interest in India's need for the power plant without success
EnronOnline went live on November 29, 1999. The site allowed Enron to transact with participants in the global energy markets. The main commodities offered on EnronOnline were natural gas and electricity, although there were 500 other products including credit derivative
s, bankruptcy swaps, pulp, gas, plastics, paper, steel, metals, freight, and TV commercial time.
EnronOnline was sold to UBS as part of the sale of the North American Natural Gas and Power trading group to UBS AG.
's Baker Institute
to "recognize outstanding individuals for their contributions to public service". Recipients were:
Greenspan, because of his position as the Fed
chairman
, was not at liberty to accept the $10,000 honorarium, the $15,000 sculpture, nor the crystal trophy, but only accepted the "honor" of being named an Enron Prize recipient. The situation was further complicated because a few days earlier, Enron had filed paperwork admitting it had "fudged financial statements for five years". Greenspan did not mention Enron a single time during his speech. At the ceremony, Ken Lay indicated his beliefs about the future of the award when he stated, "I'm looking forward to our first woman recipient." The next morning, it was reported in The Houston Chronicle that no decision had been made on whether the name of the prize would be changed. 19 days after the prize was awarded to Greenspan, Enron declared bankruptcy.
, Enron suffered the largest Chapter 11 bankruptcy
in history (since surpassed by those of Worldcom in 2002 and Lehman Brothers
in 2008).
As the scandal unraveled, Enron shares dropped from over US$90.00 in the summer of 2000 to just pennies. Enron had been considered a blue chip stock, so this was an unprecedented and disastrous event in the financial world. Enron's plunge occurred after it was revealed that much of its profits and revenue were the result of deals with special purpose entities
(limited partnership
s which it controlled). The result was that many of Enron's debts and the losses that it suffered were not reported in its financial statements
.
A white knight
rescue attempt by a similar, smaller energy company, Dynegy
, collapsed in late November due to concerns over an unexpected restatement of earnings. Enron filed for bankruptcy on December 2, 2001. In addition, the scandal caused the dissolution of Arthur Andersen
, which at the time was one of the world's top accounting firms. The firm was found guilty of obstruction of justice
in 2002 for destroying documents related to the Enron audit. Since the SEC is not allowed to accept audits from convicted felons, Andersen was forced to stop auditing public companies. Although the conviction was thrown out in 2005 by the Supreme Court
, the damage to the Andersen name has prevented it from returning as a viable business even on a limited scale.
Enron also withdrew a naming rights deal with the Houston Astros
Major League Baseball
club to have its name associated with their new stadium, which was formerly known as Enron Field (now Minute Maid Park
).
and trade millions of dollars worth of Enron stock. The executives and insiders at Enron knew about the offshore accounts that were hiding losses for the company; however, the investors knew nothing of this. Chief Financial Officer Andrew Fastow led the team which created the off-books companies, and manipulated the deals to provide himself, his family, and his friends with hundreds of millions of dollars in guaranteed revenue, at the expense of the corporation for which he worked and its stockholders.
In 1999, Enron launched EnronOnline, an Internet-based trading operation, which was used by virtually every energy company in the United States. Enron president and chief operating officer Jeffrey Skilling
began advocating a novel idea: the company didn't really need any "assets." By pushing the company's aggressive investment strategy, he helped make Enron the biggest wholesaler of gas and electricity, trading over $27 billion per quarter. The firm's figures, however, had to be accepted at face value. Under Skilling, Enron adopted mark to market
accounting, in which anticipated future profits from any deal were tabulated as if real today. Thus, Enron could record gains from what over time might turn out to be losses, as the company's fiscal health became secondary to manipulating its stock price on Wall Street
during the Tech boom. But when a company's success is measured by agreeable financial statements emerging from a black box
, a term Skilling himself admitted, actual balance sheets prove inconvenient. Indeed, Enron's unscrupulous actions were often gambles to keep the deception going and so push up the stock price. An advancing number meant a continued infusion of investor capital on which debt-ridden Enron in large part subsisted. Under pressure to maintain the illusion, Skilling verbally attacked Wall Street Analyst Richard Grubman, who questioned Enron's unusual accounting practice during a recorded conference call. When Grubman complained that Enron was the only company that could not release a balance sheet along with its earnings statements, Skilling replied "Well, thank you very much, we appreciate that . . . asshole." Though the comment was met with dismay and astonishment by press and public, it became an inside joke among many Enron employees, mocking Grubman for his perceived meddling rather than Skilling's lack of tact. When asked during his trial, Skilling wholeheartedly admitted that industrial dominance and abuse was a global problem: "Oh yes, yes sure, it is."
As executives sold their shares, the price began to drop. Investors were told to continue buying stock or hold steady if they already owned Enron because the stock price would rebound in the near future. Kenneth Lay's strategy for responding to Enron's continuing problems was in his demeanor. As he did many times, Lay would issue a statement or make an appearance to calm investors and assure them that Enron was headed in the right direction.
By August 15, 2001, Enron's stock price had fallen to $42. Many of the investors still trusted Lay and believed that Enron would rule the market. They continued to buy or hold their stock and lost more money every day. As October closed, the stock had fallen to $15. Many saw this as a great opportunity to buy Enron stock because of what Lay had been telling them in the media. Their trust and optimism proved to be greatly misplaced.
Lay has been accused of selling over $70 million worth of stock at this time, which he used to repay cash advances on lines of credit. He sold another $20 million worth of stock in the open market. Also, Lay's wife, Linda, has been accused of selling 500,000 shares of Enron stock totaling $1.2 million on November 28, 2001. The money earned from this sale did not go to the family but rather to charitable organizations, which had already received pledges of contributions from the foundation. Records show that Mrs. Lay placed the sale order sometime between 10:00 and 10:20 am. News of Enron's problems, including the millions of dollars in losses they had been hiding went public about 10:30 that morning, and the stock price soon fell to below one dollar.
Former Enron executive Paula Rieker has been charged with criminal insider trading. Rieker obtained 18,380 Enron shares for $15.51 a share. She sold that stock for $49.77 a share in July 2001, a week before the public was told what she already knew about the $102 million loss.
Enron sold its last business, Prisma Energy, in 2006, leaving it as an asset-less shell. In early 2007, it changed its name to Enron Creditors Recovery Corporation. Its goal is to pay off the old Enron's remaining creditors and wind down Enron's affairs.
Azurix
, the former water utility branch of the company, remains under Enron ownership, although it remains asset-less. It is involved in several litigations against the government of Argentina
claiming compensation relating to the negligence and corruption of the local governance during its management of the Buenos Aires
water concession in 1999, which led to substantial amounts of debt (approx. $620 million) and the eventual collapse of the branch.
Shortly after emerging from bankruptcy in November 2004, Enron's new board of directors sued 11 financial institutions for helping Lay, Fastow, Skilling and others hide Enron's true financial condition. The proceedings were dubbed the "megaclaims litigation." Among the defendants were Royal Bank of Scotland
, Deutsche Bank
and Citigroup
. , Enron has settled with all of the institutions, ending with Citigroup. Enron was able to obtain nearly $20 billion dollars to distribute to its creditors
as a result of the megaclaims litigation. As of December 2009, some claim and process payments are still being distributed.
, the top ranked utility analyst on Wall Street
, suspended his ratings on all energy companies conducting business in California because of the possibility that the companies would not receive full and adequate compensation for the deferred energy accounts used as the cornerstone for the California Deregulation Plan enacted in the late 1990s. Five months later, Pacific Gas & Electric (PG&E) was forced into bankruptcy. Senator Phil Gramm
, the second largest recipient of campaign
contributions from Enron, succeeded in legislating California's energy commodity trading deregulation. Despite warnings from prominent consumer groups which stated that this law would give energy traders too much influence over energy commodity prices, the legislation was passed in December 2000.
As Public Citizen
reported, "Because of Enron’s new, unregulated power auction, the company’s 'Wholesale Services' revenues quadrupled—from $12 billion in the first quarter of 2000 to $48.4 billion in the first quarter of 2001."
Before passage of the deregulation law, there had been only one Stage 3 rolling blackout
declared. Following passage, California had a total of 38 blackouts defined as Stage 3 rolling blackouts, until federal regulators intervened in June 2001. These blackouts occurred mainly as a result of a poorly designed market system that was manipulated by traders and marketers. Enron traders were revealed as intentionally encouraging the removal of power from the market during California's energy crisis by encouraging suppliers to shut down plants to perform unnecessary maintenance, as documented in recordings made at the time. These acts contributed to the need for rolling blackouts, which adversely affected many businesses dependent upon a reliable supply of electricity, and inconvenienced a large number of retail consumers. This scattered supply raised the price exponentially, and Enron traders were thus able to sell power at premium prices, sometimes up to a factor of 20x its normal peak value.
Wood pulp
Pulp is a lignocellulosic fibrous material prepared by chemically or mechanically separating cellulose fibres from wood, fibre crops or waste paper. Wood pulp is the most common raw material in papermaking.-History:...
and paper companies, with claimed revenues of nearly $101 billion in 2000. Fortune
Fortune (magazine)
Fortune is a global business magazine published by Time Inc. Founded by Henry Luce in 1930, the publishing business, consisting of Time, Life, Fortune, and Sports Illustrated, grew to become Time Warner. In turn, AOL grew as it acquired Time Warner in 2000 when Time Warner was the world's largest...
named Enron "America's Most Innovative Company" for six consecutive years. At the end of 2001, it was revealed that its reported financial condition was sustained substantially by institutionalized, systematic, and creatively planned accounting fraud
Accounting scandals
Accounting scandals, or corporate accounting scandals, are political and business scandals which arise with the disclosure of misdeeds by trusted executives of large public corporations...
, known as the "Enron scandal
Enron scandal
The Enron scandal, revealed in October 2001, eventually led to the bankruptcy of the Enron Corporation, an American energy company based in Houston, Texas, and the dissolution of Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world...
". Enron has since become a popular symbol of willful corporate fraud and corruption
Corporate crime
In criminology, corporate crime refers to crimes committed either by a corporation , or by individuals acting on behalf of a corporation or other business entity...
. The scandal also brought into question the accounting practices and activities of many corporations throughout the United States and was a factor in the creation of the Sarbanes–Oxley Act of 2002. The scandal also affected the wider business world by causing the dissolution of the Arthur Andersen
Arthur Andersen
Arthur Andersen LLP, based in Chicago, was once one of the "Big Five" accounting firms among PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG, providing auditing, tax, and consulting services to large corporations...
accounting firm.
Enron filed for bankruptcy protection in the Southern District of New York in late 2001 and selected Weil, Gotshal & Manges
Weil, Gotshal & Manges
Weil, Gotshal & Manges is a prominent international law firm, one of the largest and most prestigious in the world with 1,200 lawyers and gross annual revenue in excess of $1.1 billion. The firm was founded in New York City in 1931 by Frank Weil, Sylvan Gotshal, and Horace Manges...
as its bankruptcy counsel. It emerged from bankruptcy in November 2004, pursuant to a court-approved plan of reorganization, after one of the biggest and most complex bankruptcy cases in U.S. history. A new board of directors changed the name of Enron to Enron Creditors Recovery Corp., and focused on reorganizing and liquidating certain operations and assets of the pre-bankruptcy Enron. On September 7, 2006, Enron sold Prisma Energy International Inc.
Prisma Energy International
Prisma Energy International Inc., was a former subsidiary of Enron Corporation, formed in 2003 to own and manage the majority of Enron's overseas assets, formerly known as "Enron International". Prior to its official organization, Prisma was referred to within Enron as "InternationalCo"...
, its last remaining business, to Ashmore Energy International Ltd. (now AEI).
Early history
Omaha, Nebraska
Omaha is the largest city in the state of Nebraska, United States, and is the county seat of Douglas County. It is located in the Midwestern United States on the Missouri River, about 20 miles north of the mouth of the Platte River...
. It was reorganized in 1979 as the leading subsidiary of a holding company
Holding company
A holding company is a company or firm that owns other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself; rather, its purpose is to own shares of other companies. Holding companies allow the reduction of risk for the owners and can allow...
, InterNorth
InterNorth
InterNorth Inc. was a very large energy company headquartered in Omaha, Nebraska, in the United States, specializing in natural gas pipelines but also a force in the plastics industry, coal and petroleum exploration and production. They operated the largest natural gas pipeline in North America...
which was a highly diversified energy and energy related products company. Internorth was a leader in natural gas production, transmission and marketing as well as natural gas liquids and an innovator in the plastics industry. It owned Peak Antifreeze and developed EVAL resins for food packaging. In 1985, it bought the smaller and less diversified Houston Natural Gas
Houston Natural Gas
Houston Natural Gas Company was a gas utility headquartered in Houston, Texas. The company was acquired by InterNorth Inc. in 1985, with HNG executives taking top positions at InterNorth. Following the transaction, InterNorth was renamed Enron Corporation, and the company headquarters was moved...
.
The separate company initially named itself "HNG/InterNorth Inc.", even though InterNorth was the nominal survivor. It built a large and lavish headquarters complex with pink marble in Omaha (dubbed locally as the "Pink Palace"), that was later sold to Physicians Mutual
Historic companies in Omaha, Nebraska
This is a list of historic companies in Omaha. These businesses were either located in Omaha, founded in Omaha and/or still functioning in Omaha.-See also:* History of Omaha* Historic hospitals in Omaha...
. However, the departure of ex-InterNorth and first CEO of Enron Corp Samuel Segnar six months after the merger allowed former HNG CEO Kenneth Lay
Kenneth Lay
Kenneth Lee "Ken" Lay was an American businessman, best known for his role in the widely reported corruption scandal that led to the downfall of Enron Corporation. Lay and Enron became synonymous with corporate abuse and accounting fraud when the scandal broke in 2001...
to become the next CEO of the newly merged company. Lay soon moved the company's headquarters to Houston after swearing to keep it in Omaha and began to thoroughly re-brand the business. Lay and his secretary, Nancy McNeil, originally selected the name "Enteron" (possibly spelled in camelcase
CamelCase
CamelCase , also known as medial capitals, is the practice of writing compound words or phrases in which the elements are joined without spaces, with each element's initial letter capitalized within the compound and the first letter either upper or lower case—as in "LaBelle", "BackColor",...
as "EnterOn"), but, when it was pointed out that the term approximated a Greek word referring to the intestines, it was quickly shortened to "Enron". The final name was decided upon only after business cards, stationery, and other items had been printed reading Enteron. Enron's "crooked E" logo was designed in the mid-1990s by the late American graphic designer
Graphic designer
A graphic designer is a professional within the graphic design and graphic arts industry who assembles together images, typography or motion graphics to create a piece of design. A graphic designer creates the graphics primarily for published, printed or electronic media, such as brochures and...
Paul Rand
Paul Rand
Paul Rand Paul Rand Paul Rand (born Peretz Rosenbaum, (August 15, 1914 — November 26, 1996) was an American graphic designer, best known for his corporate logo designs, including the logos for IBM, UPS, Enron, Westinghouse, ABC, and Steve Jobs’ NeXT...
. Rand's original design included one of the elements of the E in yellow which disappeared when copied or faxed. This was quickly replaced by a green element. Almost immediately after the move to Houston, Enron began selling off key assets such as Northern PetroChemicals and took on silent partners in Enron CoGeneration, Northern Border Pipeline and Transwestern Pipeline and became a less diversified company. Early financial analysts said Enron was swimming in debt and the sale of key operations would not solve the problems.
Misleading financial accounts
In 1990, Enron Finance CEO Jeff Skilling hired Andrew FastowAndrew Fastow
Andrew Stuart Fastow was the chief financial officer of Enron Corporation that was based in Houston, Texas until the U.S. Securities and Exchange Commission opened an investigation into his and the company's conduct in 2001...
, who was well acquainted with the burgeoning deregulated energy market Skilling wanted to exploit. In 1993, Fastow set to work establishing numerous limited liability
Limited liability
Limited liability is a concept where by a person's financial liability is limited to a fixed sum, most commonly the value of a person's investment in a company or partnership with limited liability. If a company with limited liability is sued, then the plaintiffs are suing the company, not its...
special purpose entities
Special purpose entity
A special purpose entity is a legal entity created to fulfill narrow, specific or temporary objectives...
(common business practice); however, it also allowed Enron to place liability so that it would not appear in its accounts, allowing it to maintain a robust and generally growing stock price and thus keeping its critical investment grade credit ratings.
Enron was originally involved in transmitting and distributing electricity and natural gas throughout the United States. The company developed, built, and operated power plants and pipelines
Pipeline transport
Pipeline transport is the transportation of goods through a pipe. Most commonly, liquids and gases are sent, but pneumatic tubes that transport solid capsules using compressed air are also used....
while dealing with rules of law and other infrastructures worldwide. Enron owned a large network of natural gas pipelines, which stretched ocean to ocean and border to border including Northern Natural Gas, Florida Gas Transmission
Florida Gas Transmission
Florida Gas Transmission is a natural gas pipeline which brings gas from Texas, Louisiana, Mississippi, and Alabama into Florida. It is owned 50% by Southern Union Company and 50% by El Paso Corporation's Southern Natural Gas unit. Its FERC code is 34....
, Transwestern Pipeline
Transwestern Pipeline
Transwestern Pipeline Company, LLC owns and operates a natural gas transmission system that provides access to natural gas supplies in the San Juan and Rocky Mountain Basins in northwest New Mexico, southwest Colorado, the Texas-Oklahoma Panhandle, and the Permian Basin region of West Texas and...
company and a partnership in Northern Border Pipeline
Northern Border Pipeline
Northern Border Pipeline is a natural gas pipeline which brings gas from Canada through Montana, North Dakota, South Dakota, Minnesota, and Iowa into the Chicago area. It is owned by TC PipeLines, LP and ONEOK Partners and is operated by TC PipeLines, LP . Its FERC code is 89....
from Canada. The states of California, New Hampshire and Rhode Island had already passed power deregulation laws by July 1996, the time of Enron's proposal to acquire Portland General Electric
Portland General Electric
Portland General Electric is an electrical utility based in Portland in the U.S. state of Oregon. It distributes electricity to customers in parts of Multnomah, Clackamas, Marion, Yamhill, Washington, and Polk counties - half of the inhabitants of Oregon...
. In 1998, Enron moved into the water sector, creating the Azurix
Azurix
Azurix Corp. is a water services company, headquartered in Houston, Texas. The company owned and operated facilities in North America , Europe, and South America...
Corporation, which it part-floated on the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
in June 1999. Azurix failed to break into the water utility market, and one of its major concessions, in Buenos Aires
Buenos Aires
Buenos Aires is the capital and largest city of Argentina, and the second-largest metropolitan area in South America, after São Paulo. It is located on the western shore of the estuary of the Río de la Plata, on the southeastern coast of the South American continent...
, was a large-scale money-loser. After the move to Houston, many analysts criticized the Enron management as swimming in debt. The Enron management pursued aggressive retribution against its critics, setting the pattern for dealing with accountants, lawyers, and the financial media.
Enron grew wealthy due largely to marketing, promoting
Promotion (marketing)
Promotion is one of the four elements of marketing mix . It is the communication link between sellers and buyers for the purpose of influencing, informing, or persuading a potential buyer's purchasing decision....
power, and its high stock price. Enron was named "America's Most Innovative Company" by Fortune
Fortune (magazine)
Fortune is a global business magazine published by Time Inc. Founded by Henry Luce in 1930, the publishing business, consisting of Time, Life, Fortune, and Sports Illustrated, grew to become Time Warner. In turn, AOL grew as it acquired Time Warner in 2000 when Time Warner was the world's largest...
for six consecutive years, from 1996 to 2001. It was on the Fortunes "100 Best Companies to Work for in America" list in 2000, and had offices that were stunning in their opulence. Enron was hailed by many, including labor and the workforce, as an overall great company, praised for its large long-term pensions, benefits for its workers and extremely effective management
Vitality curve
A vitality curve is a leadership construct whereby a workforce is graded in accordance with the productivity of its members.For example, there is an often cited "80-20 rule" - also known as the "Pareto principle" or the "Law of the Vital Few" - whereby 80% of crimes are committed by 20% of...
until its exposure in corporate fraud. The first analyst to publicly disclose Enron's financial flaws was Daniel Scotto
Daniel Scotto
Daniel "Dan" Scotto is an American financial analyst. In August 2001, as an analyst with BNP Paribas, Scotto downgraded Enron securities from "Buy" to "Neutral". He took this action four months before the Enron accounting scandal was revealed that led to the company's bankruptcy. Scotto claims...
, who in August 2001 issued a report entitled "All Stressed up and no place to go", which encouraged investors to sell Enron stocks and bonds at any and all costs.
As was later discovered, many of Enron's recorded assets and profits were inflated or even wholly fraudulent and nonexistent. Debts and losses were put into entities formed "offshore" that were not included in the firm's financial statement
Financial statement
A financial statement is a formal record of the financial activities of a business, person, or other entity. In British English—including United Kingdom company law—a financial statement is often referred to as an account, although the term financial statement is also used, particularly by...
s, and other sophisticated and arcane financial transactions between Enron and related companies were used to take unprofitable entities off the company's books.
Its most valuable asset and the largest source of honest income, the 1930s-era Northern Natural Gas, was eventually purchased back by a group of Omaha investors, who moved its headquarters back to Omaha, and is now a unit of Warren Buffett
Warren Buffett
Warren Edward Buffett is an American business magnate, investor, and philanthropist. He is widely regarded as one of the most successful investors in the world. Often introduced as "legendary investor, Warren Buffett", he is the primary shareholder, chairman and CEO of Berkshire Hathaway. He is...
's MidAmerican Energy Holdings Corp. NNG was put up as collateral for a $2.5 billion capital infusion by Dynegy Corporation
Dynegy
Dynegy Inc. , based in Houston, Texas, United States, is a large owner and operator of power plants and a player in the natural gas liquids and coal business...
when Dynegy was planning to buy Enron. When Dynegy looked closely at Enron's books, they backed out of the deal and fired their CEO, Chuck Watson. The new chairman and head CEO, the late Daniel Dienstbier, had been president of NNG and an Enron executive at one time and was forced out of Enron by Ken Lay. Dienstbier was an acquaintance of Warren Buffett. NNG continues to be profitable today.
Former management and corporate governance
Central Management- Kenneth LayKenneth LayKenneth Lee "Ken" Lay was an American businessman, best known for his role in the widely reported corruption scandal that led to the downfall of Enron Corporation. Lay and Enron became synonymous with corporate abuse and accounting fraud when the scandal broke in 2001...
: Chairman, and Chief executive officer - Jeffrey SkillingJeffrey SkillingJeffrey Keith "Jeff" Skilling is the former president of Enron Corporation, headquartered in Houston, Texas. In 2006 he was convicted of multiple federal felony charges relating to Enron's financial collapse, and is currently serving a 24-year, four-month prison sentence at the Federal...
: President, Chief operating officer, and CEO (February–August 2001) - Andrew FastowAndrew FastowAndrew Stuart Fastow was the chief financial officer of Enron Corporation that was based in Houston, Texas until the U.S. Securities and Exchange Commission opened an investigation into his and the company's conduct in 2001...
: Chief financial officer - Rick CauseyRichard CauseyRichard Alan Causey is one of the prominent figures in the Enron accounting scandal. Causey was Enron's Executive Vice President and Chief Accounting Officer....
: Chief accounting officer - Rebecca Mark-JusbascheRebecca Mark-JusbascheRebecca P. Mark-Jusbasche was famous as the head of the Enron International division of Enron. She later was promoted to Vice-Chairman of Enron, and resigned from the company in 2000 following the failure of a major investment.-Early life:Rebecca Sue Pulliam was born in Kirksville, Missouri, and...
: CEO of Enron International and AzurixAzurixAzurix Corp. is a water services company, headquartered in Houston, Texas. The company owned and operated facilities in North America , Europe, and South America... - Lou PaiLou PaiLou Lung Pai born Nanjing China 1946, is a Chinese-American businessman and former Enron executive. He was CEO of Enron Energy Services and Enron Xcelerator, a venture capital division of Enron. He left Enron with over $250 million...
: CEO of Enron Energy ServicesEnron Energy ServicesEnron Energy Services was a business unit of Enron Corporation, whose purpose was to provide gas, electricity, and energy management directly to businesses and homes. Enron compared the service to choosing a telecommunications company to provide your house with a phone line. Consumers would be... - Forest Hoglund: CEO of Enron Oil and Gas
- Richard Gallagher: Head of Enron Wholesale Global International Group
- Kenneth "Ken" Rice: CEO of Enron Wholesale and Enron Broadband Services
- J. Clifford BaxterJ. Clifford BaxterJohn Clifford "Cliff" Baxter was a former Enron Corporation executive who resigned in May 2001. He sold $30 million worth of Enron stock during the months prior to Enron's bankruptcy. Reportedly, Baxter clashed with CEO Jeffrey Skilling over questionable Enron business practices...
: CEO of Enron North America - Sherron WatkinsSherron WatkinsSherron Watkins was Vice President of Corporate Development at the Enron Corporation. She is considered by many to be the whistleblower who helped to uncover the Enron scandal in 2001....
: Head of Enron Global Finance - Jim Derrick: Enron General Counsel
- Mark Koenig: Head of Enron Investor Relations
- Joan Foley: Head of Enron Human Resources
- Greg Whally: President and COO of Enron (August 2001– Bankruptcy)
- Jeff McMahon: CFO of Enron (October 2001-Bankruptcy)
-
- Board Of directors
-
- Robert A. Belfer: Chairman, Belco Oil and Gas Corp
- Norman P. Blake Jr.: Chairman, President and CEO, Comdisco, Inc.
- Ronnie C. ChanRonnie ChanRonnie Chan Chi-chung is a Hong Kong entrepreneur. He graduated with an MBA from the University of Southern California....
: Chairman, Hang Lung Group - John H. Duncan: Former Chairman of The Executive Gulf and Western Industries Inc.
- Wendy L. Gramm: Former Chairman of US Commodity Futures Trading CommissionCommodity Futures Trading CommissionThe U.S. Commodity Futures Trading Commission is an independent agency of the United States government that regulates futures and option markets....
- Ken L. Harrison: Former Chairman and CEO of Portland General ElectricPortland General ElectricPortland General Electric is an electrical utility based in Portland in the U.S. state of Oregon. It distributes electricity to customers in parts of Multnomah, Clackamas, Marion, Yamhill, Washington, and Polk counties - half of the inhabitants of Oregon...
- Robert K. Jaedicke: Professor EmeritusEmeritusEmeritus is a post-positive adjective that is used to designate a retired professor, bishop, or other professional or as a title. The female equivalent emerita is also sometimes used.-History:...
of Accounting at Stanford UniversityStanford UniversityThe Leland Stanford Junior University, commonly referred to as Stanford University or Stanford, is a private research university on an campus located near Palo Alto, California. It is situated in the northwestern Santa Clara Valley on the San Francisco Peninsula, approximately northwest of San... - Charles A. LeMaistre: President Emeritus, University of Texas M.D. Anderson Cancer Center
- John Mendelsohn: President, University of Texas M.D. Anderson Cancer Center
- Jerome J. Meyer: Chairman, TektronixTektronixTektronix, Inc. is an American company best known for its test and measurement equipment such as oscilloscopes, logic analyzers, and video and mobile test protocol equipment. In November 2007, Tektronix became a subsidiary of Danaher Corporation....
- Paulo V. Ferraz Pereira: Executive Vice President if Group Bozano
- Frank Savage: Chairman: Alliance Capital ManagementAllianceBernsteinAllianceBernstein LP is a US-based, global asset management firm, owned by the French insurance conglomerate, AXA, with approximately $402 billion in assets under management, as of September 30, 2011....
- John A. Urquhart: Senior Advisor to the Chairman of Enron
- John WakehamJohn WakehamJohn Wakeham, Baron Wakeham, PC, DL is a businessman and British Conservative Party politician and the current Chancellor of Brunel University.He was a director of Enron from 1994 until its bankruptcy in 2001....
: Former U.K. Secretary of state for Energy - Herbert S. Winokur Jr.: President of Winokur Holdings Inc.
Products
Enron traded in more than 30 different products, including the following:- Products traded on EnronOnline
- Petrochemicals
- Plastics
- PowerElectric powerElectric power is the rate at which electric energy is transferred by an electric circuit. The SI unit of power is the watt.-Circuits:Electric power, like mechanical power, is represented by the letter P in electrical equations...
- PulpWood pulpPulp is a lignocellulosic fibrous material prepared by chemically or mechanically separating cellulose fibres from wood, fibre crops or waste paper. Wood pulp is the most common raw material in papermaking.-History:...
and paper - Steel
- Weather Risk ManagementWeather risk managementWeather risk management is a type of risk management done by organizations to address potential financial losses caused by unusual weather.-Overview:...
- OilPetroleumPetroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
and LNGLiquefied natural gasLiquefied natural gas or LNG is natural gas that has been converted temporarily to liquid form for ease of storage or transport....
transportation - Broadband
- Principal investments
- Risk management for commodities
- Shipping / freightCargoCargo is goods or produce transported, generally for commercial gain, by ship, aircraft, train, van or truck. In modern times, containers are used in most intermodal long-haul cargo transport.-Marine:...
- Streaming media
- Water and wastewaterWastewaterWastewater is any water that has been adversely affected in quality by anthropogenic influence. It comprises liquid waste discharged by domestic residences, commercial properties, industry, and/or agriculture and can encompass a wide range of potential contaminants and concentrations...
It was also an extensive futures trader
Futures contract
In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...
, including sugar, coffee, grains, hog, and other meat futures. At the time of its bankruptcy filing in December 2001, Enron structured into seven distinct business units.
Online marketplace services
- EnronOnline (commodity trading platform)
- ClickPaper (transaction platform for pulp, paper, and wood products)
- EnronCredit (the first global online credit department to provide live credit prices and enable business-to-business customers to hedge credit exposure instantly via the Internet.)
- ePowerOnline (customer interface for Enron Broadband Services)
- Enron Direct (sales of fixed-price contracts for gas and electricity; Europe only)
- EnergyDesk (energy-related derivatives trading; Europe only)
- NewPowerCompany (online energy trading, joint venture with IBMIBMInternational Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
and AOLAOLAOL Inc. is an American global Internet services and media company. AOL is headquartered at 770 Broadway in New York. Founded in 1983 as Control Video Corporation, it has franchised its services to companies in several nations around the world or set up international versions of its services...
) - Enron Weather (weather derivatives)
- DealBench (online business services)
- Water2Water (water storage, supply, and quality credits trading)
- HotTap (customer interface for Enron's U.S. gas pipeline businesses)
- Enromarkt (business to business pricing and information platform; Germany only)
Broadband services
- Enron Intelligent Network (broadband content delivery)
- Enron Media Services (risk management services for media content companies)
- Customizable Bandwidth Solutions (bandwidth and fiber products trading)
- Streaming Media Applications (live or on-demand Internet broadcasting applications)
Energy and commodities services
- Enron Power (electricity wholesaling)
- Enron Natural Gas (natural gas wholesaling)
- Enron Clean Fuels (biofuelBiofuelBiofuel is a type of fuel whose energy is derived from biological carbon fixation. Biofuels include fuels derived from biomass conversion, as well as solid biomass, liquid fuels and various biogases...
wholesaling) - Enron Pulp and Paper, Packaging, and Lumber (risk management derivatives for forest products industry)
- Enron Coal and Emissions (coal wholesaling and CO2 offsets trading)
- Enron Plastics and Petrochemicals (price risk management for polymers, olefins, methanol, aromatics, and natural gas liquids)
- Enron Weather Risk Management (Weather DerivativesWeather derivativesWeather derivatives are financial instruments that can be used by organizations or individuals as part of a risk management strategy to reduce risk associated with adverse or unexpected weather conditions...
) - Enron Steel (financial swap contracts and spot pricing for the steel industry)
- Enron Crude Oil and Oil Products (petroleum hedging)
- Enron Wind Power ServicesEnron WindEnron Wind Systems, part of the Enron group, were manufacturers of wind turbines. The group was formed after the acquisition in January 1997 of Zond Corporation of California, the largest US developer of wind-powered electricity at the time....
(wind turbine manufacturing and wind farm operation) - MG Plc. (U.K. metals merchant)
- Enron Energy ServicesEnron Energy ServicesEnron Energy Services was a business unit of Enron Corporation, whose purpose was to provide gas, electricity, and energy management directly to businesses and homes. Enron compared the service to choosing a telecommunications company to provide your house with a phone line. Consumers would be...
(Selling services to industrial end users) - Enron International (operation of all overseas assets)
Commercial and industrial outsourcing services
- Commodity Management
- Energy Asset Management
- Energy Information Management
- Facility Management
- Capital Management
- AzurixAzurixAzurix Corp. is a water services company, headquartered in Houston, Texas. The company owned and operated facilities in North America , Europe, and South America...
Inc. (water utilities and infrastructure)
Project development and management services
- Energy Infrastructure Development (developing, financing, and operation of power plants and related projects)
- Enron Global Exploration & Production Inc. (oil and natural gas field services)
- Elektro Electricidade e Servicos SA (Brazilian electric utility)
Energy transportation and upstream services
- Natural Gas Transportation
- Northern Border PipelineNorthern Border PipelineNorthern Border Pipeline is a natural gas pipeline which brings gas from Canada through Montana, North Dakota, South Dakota, Minnesota, and Iowa into the Chicago area. It is owned by TC PipeLines, LP and ONEOK Partners and is operated by TC PipeLines, LP . Its FERC code is 89....
- Houston Pipeline
- Transwestern PipelineTranswestern PipelineTranswestern Pipeline Company, LLC owns and operates a natural gas transmission system that provides access to natural gas supplies in the San Juan and Rocky Mountain Basins in northwest New Mexico, southwest Colorado, the Texas-Oklahoma Panhandle, and the Permian Basin region of West Texas and...
- Florida Gas TransmissionFlorida Gas TransmissionFlorida Gas Transmission is a natural gas pipeline which brings gas from Texas, Louisiana, Mississippi, and Alabama into Florida. It is owned 50% by Southern Union Company and 50% by El Paso Corporation's Southern Natural Gas unit. Its FERC code is 34....
- Northern Natural Gas Company
- Natural Gas Storage
- Compression Services
- Gas Processing and Treatment
- Engineering, Procurement, and Construction Services
- EOTT Energy Inc. (oil transportation)
Enron manufactured gas valves, circuit breaker
Circuit breaker
A circuit breaker is an automatically operated electrical switch designed to protect an electrical circuit from damage caused by overload or short circuit. Its basic function is to detect a fault condition and, by interrupting continuity, to immediately discontinue electrical flow...
s, thermostats, and electrical equipment in Venezuela through INSELA SA, a 50–50 joint venture with General Electric
General Electric
General Electric Company , or GE, is an American multinational conglomerate corporation incorporated in Schenectady, New York and headquartered in Fairfield, Connecticut, United States...
. Enron owned three paper and pulp products companies: Garden State Paper, a newsprint mill; as well as Papiers Stadacona and St. Aurelie Timberlands. Enron held a controlling stake in the Louisiana-based petroleum exploration and production company Mariner Energy.
Enron International
Enron International (EI) was Enron's wholesale asset development and asset management business. Its primary focus was developing and building natural gas power plants outside North America. Enron Engineering and Construction Company (EECC) was a wholly owned subsidiary of Enron International, and built almost all of Enron International's power plants. Unlike other business units of Enron, Enron International had a strong cash flow on bankruptcy filing. Enron International consisted of all of Enron's foreign power projects including ones in Europe.Leadership
Rebecca Mark was the CEO of Enron International until she moved over to lead Enron's newly acquired water business, AzurixAzurix
Azurix Corp. is a water services company, headquartered in Houston, Texas. The company owned and operated facilities in North America , Europe, and South America...
, in 1997. Rebecca played a major role in the development of the Dabhol project in India, Enron's largest international endeavor.
Projects
Enron International constructed a lot of power plants and pipelines all across the globe. Some today are still up and running, including the massive Teeside plant in England. Others, like a barge mounted plant off Puerto Plata in the Dominican Republic, cost Enron loads of money through law suits and investment losses. Puerto Plata was a barge mounted power plant next to a hotel called Hotelero del Atlantico. When the plant was fired up, winds blew soot from the plant onto the hotel guests' meals, blackening their food. The winds also blew garbage from nearby slums into the plant's water-intake system. For some time the only solution was to hire men who would row out and push the garbage away with their paddles. For Enron, the deal was a complete waste of money. Through mid-2000 the company collected a paltry $3.5 million from a $95 million investment. Other projects considered investments in Europe, South America, Argentina, BrazilBrazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...
, Bolivia, Colombia
Colombia
Colombia, officially the Republic of Colombia , is a unitary constitutional republic comprising thirty-two departments. The country is located in northwestern South America, bordered to the east by Venezuela and Brazil; to the south by Ecuador and Peru; to the north by the Caribbean Sea; to the...
, Mexico, Jamaica
Jamaica
Jamaica is an island nation of the Greater Antilles, in length, up to in width and 10,990 square kilometres in area. It is situated in the Caribbean Sea, about south of Cuba, and west of Hispaniola, the island harbouring the nation-states Haiti and the Dominican Republic...
, Venezuela, and across the Caribbean
Caribbean
The Caribbean is a crescent-shaped group of islands more than 2,000 miles long separating the Gulf of Mexico and the Caribbean Sea, to the west and south, from the Atlantic Ocean, to the east and north...
.
India
Enron is well known for its actions in IndiaIndia
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
. Around 1992 India came to the United States to find energy investors to help India with its energy shortage problems. Many companies were wary of doing business with India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
; Enron was not. In December 1993, Enron inked a 20-year power-purchase contract with the Maharashtra State Electricity Board
Maharashtra State Electricity Board
Maharashtra State Electricity Board is a state-owned electricity regulation board operating within the state of Maharashtra in India. The MSEB was formed on June 20, 1960 under Section 5 of the Electricity Act, 1948...
. The contract allowed Enron to construct a massive 2,015 megawatt power plant. Construction would be completed in two phases and Enron would form its own power company to help manage the plant, the Dabhol Power Company
Dabhol Power Company
The Dabhol Power Company was a company based in India, formed to manage and operate the Dabhol Power Plant. The Dabhol plant was built through the combined effort of Enron, GE, and Bechtel...
. The power project was the first step in a $20 billion scheme to help rebuild and stabilize India's power grid. Enron, GE
Gê
Gê are the people who spoke Ge languages of the northern South American Caribbean coast and Brazil. In Brazil the Gê were found in Rio de Janeiro, Minas Gerais, Bahia, Piaui, Mato Grosso, Goias, Tocantins, Maranhão, and as far south as Paraguay....
(who was selling turbines to the project), and Bechtel
Bechtel
Bechtel Corporation is the largest engineering company in the United States, ranking as the 5th-largest privately owned company in the U.S...
(who was actually constructing the plant), each put up 10% equity
Ownership equity
In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists...
.
In 1996 when India's Congress Party was no longer in power, the Indian government assessed the project as being excessively expensive and refused to pay for the plant and stopped construction. The Maharashtra State Electricity Board (MSEB), the local state run utility, was required by contract to continue to pay Enron plant maintenance charges, even if no power was purchased from the plant. The MSEB determined that it could not afford to purchase the power (at Rs. 8 per unit kWh) charged by Enron. The plant operator was unable to find alternate customers for Dabhol power due to the absence of an open free market in the regulated structure of utilities in India. From 1996 until Enron's bankruptcy in 2001 the company tried to revive the project and spark interest in India's need for the power plant without success
Project Summer
During the summer of 2001, Enron was making an attempt to sell a lot of Enron International's assets, many of which were not sold. It is still unclear why Enron wanted to sell all of these assets. Most suspect it was because Enron was in need of cash.EnronOnline
In November 1999, Enron launched EnronOnline. Conceptualized by the company's European Gas Trading team under John Siepierski, it was the first web-based transaction system that allowed buyers and sellers to buy, sell, and trade commodity products globally. It allowed users to do business only with Enron. At its peak, over $6bn worth of commodities were transacted through EnronOnline every day.EnronOnline went live on November 29, 1999. The site allowed Enron to transact with participants in the global energy markets. The main commodities offered on EnronOnline were natural gas and electricity, although there were 500 other products including credit derivative
Credit derivative
In finance, a credit derivative is a securitized derivative whose value is derived from the credit risk on an underlying bond, loan or any other financial asset. In this way, the credit risk is on an entity other than the counterparties to the transaction itself...
s, bankruptcy swaps, pulp, gas, plastics, paper, steel, metals, freight, and TV commercial time.
EnronOnline was sold to UBS as part of the sale of the North American Natural Gas and Power trading group to UBS AG.
Power plants
Enron owned or operated 38 electric power plants worldwide:- TeessideTeesside power stationTeesside Power Station is a partially mothballed gas-fired power station, in Redcar & Cleveland, England. Situated near the Wilton chemical complex, the station has combined cycle gas turbines and open cycle gas turbines , however in 2011 the operation of the CCGT part of the station was suspended...
(United Kingdom)—at the time of commission in 1992, at 1750 MW, was the largest Natural Gas Co-Gen plant in the world. Its on-time and under-budget completion put Enron Power on the map as an international developer, owner and operator. - Bahia Las Minas (Panama)—largest thermal power plant in Central America, 355 MW
- Puerto Quetzal Power Project (Guatemala)—110 MW
- PQP LLC (Guatemala)—holding company for 124 MW Power Barge named "Esperanza"
- Empresa Energetica Corinto (Nicaragua)—holding company for "Margarita II" 70.5 MW power barge, Enron held 35% share
- EcoElectrica (Puerto Rico, USA)—507 MW natural gas cogeneration plant, with adjacent LNG import terminal- supplied 20% of island's electricity
- Puerto Plata Power Project (Dominican Republic)—185 MW power barge named "Puerto Plata"
- Modesto Maranzana Power Plant (Argentina)—70 MW
- Cuiaba Integrated Project (Brazil)—480 MW combined cycle power plant
- Nowa Sarzyna Power Plant (Poland)—116 MW, first privately developed post-Communist electricity project in Poland
- Sarlux Power Project (Italy)—551 MW combined cycle power plant, converted residue from Italy's largest oil refinery into synthetic gas for fuel
- Trakya Power Project (Turkey)—478 MW
- Chengdu Cogen Project (China)—284 MW, joint venture with Sichuan Electric Company
- Northern Marianas Power Project (Guam, USA)—80 MW slow speed diesel oil plant
- Batangas Power Project (Philippines)—110 MW
- Subic Bay Power Project (Philippines)—116 MW
- Dabhol Power ProjectDabhol Power CompanyThe Dabhol Power Company was a company based in India, formed to manage and operate the Dabhol Power Plant. The Dabhol plant was built through the combined effort of Enron, GE, and Bechtel...
(India)—2,184 MW combined cycle plant, generally considered one of Enron's most controversial and least successful projects - Storm Lake Wind Generation Project (Iowa, USA)—193 MW wind farm
- Lake Benton II Wind Generation Facility (Minnesota, USA)—104 MW wind farm
- Lake Benton I Wind Generation Facility (Minnesota, USA)—107 MW wind farm
- Cabazon Wind Generation Facility (California, USA)—40 MW wind farm
- Green Power I Wind Generation Facility (California, USA)—16.5 MW wind farm
- Indian Mesa I Wind Generation Facility (Texas, USA)—25.5 MW wind farm
- Clear Sky Wind Power Generation Facility (Texas, USA)—135 MW wind farm
- Mill Run Wind Wind Power Generation FacilityMill Run Wind Energy CenterThe Mill Run Wind Energy Center is a wind farm located in Fayette County, Pennsylvania with ten 1.5 MW Enron Wind TZs that began commercial operation in November 2001. The wind farm has a combined total nameplate capacity of 15 MW, but actually produces about 39,420 megawatt-hours of electricity...
(Pennsylvania, USA)—15 MW wind farm - Trent Mesa Wind Generation Facility (Texas, USA)—150 MW wind farm
- Montfort Wind Generation Facility (Wisconsin, USA)—30 MW wind farm
- 8 hydroelectric plants in Oregon with a combined capacity of 509 MW, owned through Portland General ElectricPortland General ElectricPortland General Electric is an electrical utility based in Portland in the U.S. state of Oregon. It distributes electricity to customers in parts of Multnomah, Clackamas, Marion, Yamhill, Washington, and Polk counties - half of the inhabitants of Oregon...
- 4 additional thermal plants in Oregon and Montana with a combined capacity of 1,464 MW, owned through Portland General ElectricPortland General ElectricPortland General Electric is an electrical utility based in Portland in the U.S. state of Oregon. It distributes electricity to customers in parts of Multnomah, Clackamas, Marion, Yamhill, Washington, and Polk counties - half of the inhabitants of Oregon...
Pipelines
- Centragas (Colombia)—357 miles, natural gas
- Promigas (Colombia)
- Transportadora de Gas del Sur (Argentina)—largest pipeline system in South America, 5,005 km
- CEG (Brazil)—1,368 miles, natural gas
- CEGRio (Brazil)
- Transredes (Bolivia)—3,000 km natural gas pipeline and 2,500 km oil & liquids pipeline
- Bolivia-to-Brazil Pipeline (Bolivia/Brazil)—3,000 km, natural gas
- Northern Natural Gas (Upper Midwestern USA)—16,500 miles, included share in Trailblazer Pipeline
- Transwestern Pipeline (Texas, Arizona, New Mexico, Colorado)—2,554 miles
- Florida Gas Transmission (Texas, Louisiana, Alabama, Mississippi, Florida)—4,800 miles
- Northern Border Pipeline (Indiana, Illinois, Iowa, South Dakota, North Dakota, Montana )—1,249 miles
Electric utilities/distributors
- Portland General ElectricPortland General ElectricPortland General Electric is an electrical utility based in Portland in the U.S. state of Oregon. It distributes electricity to customers in parts of Multnomah, Clackamas, Marion, Yamhill, Washington, and Polk counties - half of the inhabitants of Oregon...
Company (USA)—serving 775,000 customers in Oregon - Elektro Electricidade e Servicos S.A. (Brazil)—1.5 million customers
- Compania Anonima Luz y Fuerza Electricas de Puerto Cabello (Venezuela)—50,000 customers
Natural gas-related businesses
- ProCaribe (Puerto Rico, USA)—LPG storage terminal, only fully refrigerated LPG storage facility in Caribbean
- San Juan Gas Company (Puerto Rico, USA)—gas distribution, 400 industrial/commercial customers
- Industrial Gases Ltd. (Jamaica)—8 filling plants, industrial gas manufacturing & LPG distribution, held 100% monopoly on Jamaican industrial gas business and 40% of LPG business
- Gaspart (Brazil)—consortium of 7 gas distribution companies
- Vengas (Venezuela)—LPG transportation and distribution
- ACCRO III and IV Project(Venezuela) is the largest outsourcing contract offered by PDVSA. Enron's partners in the venture were Accro Barbados Ltd., a subsidiary of TransCanada Pipelines Ltd., and private Venezuelan company Tecnoconsult. The project included two extraction plants, each with 400 MM cubic feet per day capacity, a fractionation plant to remove the liquids and other related infrastructure
- SK-Enron Company Ltd. (South Korea)—joint venture with SK Corporation; included 8 city gas utilities, an LPG distributor, and a steam and electricity cogeneration facility
Pulp and paper
- Garden State Paper Company Inc. (New Jersey, USA)—paperboard and newsprint recycling mill
- Papiers Stadacona Ltee. (Quebec, Canada)—wood pulp & paper mill
- St. Aurelie Timberlands Company Ltd. (Quebec, and New Brunswick, Canada & Maine, USA)—timber company
Other
- Mariner Energy Inc. (Houston, Texas, USA)—oil & gas exploration, development, and production with operations in the Gulf of Mexico
- Interruptores Especializados Lara (Venezuela)—manufacturer of valves, thermostats, and electrical breakers for appliances
- Enron WindEnron WindEnron Wind Systems, part of the Enron group, were manufacturers of wind turbines. The group was formed after the acquisition in January 1997 of Zond Corporation of California, the largest US developer of wind-powered electricity at the time....
(formerly Zond) – manufacturer of wind power turbinesWind turbineA wind turbine is a device that converts kinetic energy from the wind into mechanical energy. If the mechanical energy is used to produce electricity, the device may be called a wind generator or wind charger. If the mechanical energy is used to drive machinery, such as for grinding grain or...
and related systems, with factories in USA, Spain, Portugal, and Germany. Purchased by General ElectricGeneral ElectricGeneral Electric Company , or GE, is an American multinational conglomerate corporation incorporated in Schenectady, New York and headquartered in Fairfield, Connecticut, United States...
in 2002.
Enron Prize for Distinguished Public Service
In the mid-1990s, Enron established an endowment for the Enron Prize for Distinguished Public Service, awarded by Rice UniversityRice University
William Marsh Rice University, commonly referred to as Rice University or Rice, is a private research university located on a heavily wooded campus in Houston, Texas, United States...
's Baker Institute
James Baker Institute
The James A. Baker III Institute for Public Policy, often shortened to Baker Institute, is a think tank on the campus of Rice University in Houston, Texas. Founded in 1993, it has become a notable center of public policy research. It is named for James Baker, former United States Secretary of State...
to "recognize outstanding individuals for their contributions to public service". Recipients were:
- 1995: Colin PowellColin PowellColin Luther Powell is an American statesman and a retired four-star general in the United States Army. He was the 65th United States Secretary of State, serving under President George W. Bush from 2001 to 2005. He was the first African American to serve in that position. During his military...
- 1997: Mikhail GorbachevMikhail GorbachevMikhail Sergeyevich Gorbachev is a former Soviet statesman, having served as General Secretary of the Communist Party of the Soviet Union from 1985 until 1991, and as the last head of state of the USSR, having served from 1988 until its dissolution in 1991...
- 1999 (early): Eduard ShevardnadzeEduard ShevardnadzeEduard Shevardnadze is a former Soviet, and later, Georgian statesman from the height to the end of the Cold War. He served as President of Georgia from 1995 to 2003, and as First Secretary of the Georgian Communist Party , from 1972 to 1985. Shevardnadze was responsible for many top decisions on...
- 1999 (late): Nelson MandelaNelson MandelaNelson Rolihlahla Mandela served as President of South Africa from 1994 to 1999, and was the first South African president to be elected in a fully representative democratic election. Before his presidency, Mandela was an anti-apartheid activist, and the leader of Umkhonto we Sizwe, the armed wing...
- 2001: Alan GreenspanAlan GreenspanAlan Greenspan is an American economist who served as Chairman of the Federal Reserve of the United States from 1987 to 2006. He currently works as a private advisor and provides consulting for firms through his company, Greenspan Associates LLC...
Greenspan, because of his position as the Fed
Federal Reserve System
The Federal Reserve System is the central banking system of the United States. It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907...
chairman
Chairman of the Federal Reserve
The Chairman of the Board of Governors of the Federal Reserve System is the head of the central banking system of the United States. Known colloquially as "Chairman of the Fed," or in market circles "Fed Chairman" or "Fed Chief"...
, was not at liberty to accept the $10,000 honorarium, the $15,000 sculpture, nor the crystal trophy, but only accepted the "honor" of being named an Enron Prize recipient. The situation was further complicated because a few days earlier, Enron had filed paperwork admitting it had "fudged financial statements for five years". Greenspan did not mention Enron a single time during his speech. At the ceremony, Ken Lay indicated his beliefs about the future of the award when he stated, "I'm looking forward to our first woman recipient." The next morning, it was reported in The Houston Chronicle that no decision had been made on whether the name of the prize would be changed. 19 days after the prize was awarded to Greenspan, Enron declared bankruptcy.
2001 Accounting scandal
In 2001, after a series of revelations involving irregular accounting procedures bordering on fraud perpetrated throughout the 1990s involving Enron and its accounting firm Arthur AndersenArthur Andersen
Arthur Andersen LLP, based in Chicago, was once one of the "Big Five" accounting firms among PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG, providing auditing, tax, and consulting services to large corporations...
, Enron suffered the largest Chapter 11 bankruptcy
Chapter 11, Title 11, United States Code
Chapter 11 is a chapter of the United States Bankruptcy Code, which permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to every business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most...
in history (since surpassed by those of Worldcom in 2002 and Lehman Brothers
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
in 2008).
As the scandal unraveled, Enron shares dropped from over US$90.00 in the summer of 2000 to just pennies. Enron had been considered a blue chip stock, so this was an unprecedented and disastrous event in the financial world. Enron's plunge occurred after it was revealed that much of its profits and revenue were the result of deals with special purpose entities
Special purpose entity
A special purpose entity is a legal entity created to fulfill narrow, specific or temporary objectives...
(limited partnership
Limited partnership
A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners , there are one or more limited partners . It is a partnership in which only one partner is required to be a general partner.The GPs are, in all major respects,...
s which it controlled). The result was that many of Enron's debts and the losses that it suffered were not reported in its financial statements
Financial statements
A financial statement is a formal record of the financial activities of a business, person, or other entity. In British English—including United Kingdom company law—a financial statement is often referred to as an account, although the term financial statement is also used, particularly by...
.
A white knight
White knight (business)
In business, a white knight, or "friendly investor," may be a corporation or a person that intends to help another firm. There are many types of white knights...
rescue attempt by a similar, smaller energy company, Dynegy
Dynegy
Dynegy Inc. , based in Houston, Texas, United States, is a large owner and operator of power plants and a player in the natural gas liquids and coal business...
, collapsed in late November due to concerns over an unexpected restatement of earnings. Enron filed for bankruptcy on December 2, 2001. In addition, the scandal caused the dissolution of Arthur Andersen
Arthur Andersen
Arthur Andersen LLP, based in Chicago, was once one of the "Big Five" accounting firms among PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG, providing auditing, tax, and consulting services to large corporations...
, which at the time was one of the world's top accounting firms. The firm was found guilty of obstruction of justice
Obstruction of justice
The crime of obstruction of justice, in United States jurisdictions, refers to the crime of interfering with the work of police, investigators, regulatory agencies, prosecutors, or other officials...
in 2002 for destroying documents related to the Enron audit. Since the SEC is not allowed to accept audits from convicted felons, Andersen was forced to stop auditing public companies. Although the conviction was thrown out in 2005 by the Supreme Court
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
, the damage to the Andersen name has prevented it from returning as a viable business even on a limited scale.
Enron also withdrew a naming rights deal with the Houston Astros
Houston Astros
The Houston Astros are a Major League Baseball team located in Houston, Texas. They are a member of the National League Central division. The Astros are expected to join the American League West division in 2013. Since , they have played their home games at Minute Maid Park, known as Enron Field...
Major League Baseball
Major League Baseball
Major League Baseball is the highest level of professional baseball in the United States and Canada, consisting of teams that play in the National League and the American League...
club to have its name associated with their new stadium, which was formerly known as Enron Field (now Minute Maid Park
Minute Maid Park
Minute Maid Park is a ballpark in Downtown Houston, Texas, United States that opened in 2000 to house the Major League Baseball Houston Astros....
).
Accounting practices
Enron had created offshore entities, units which may be used for planning and avoidance of taxes, raising the profitability of a business. This provided ownership and management with full freedom of currency movement and the anonymity that allowed the company to hide losses. These entities made Enron look more profitable than it actually was, and created a dangerous spiral, in which each quarter, corporate officers would have to perform more and more contorted financial deception to create the illusion of billions in profits while the company was actually losing money. This practice drove up their stock price to new levels, at which point the executives began to work on insider informationInsider trading
Insider trading is the trading of a corporation's stock or other securities by individuals with potential access to non-public information about the company...
and trade millions of dollars worth of Enron stock. The executives and insiders at Enron knew about the offshore accounts that were hiding losses for the company; however, the investors knew nothing of this. Chief Financial Officer Andrew Fastow led the team which created the off-books companies, and manipulated the deals to provide himself, his family, and his friends with hundreds of millions of dollars in guaranteed revenue, at the expense of the corporation for which he worked and its stockholders.
In 1999, Enron launched EnronOnline, an Internet-based trading operation, which was used by virtually every energy company in the United States. Enron president and chief operating officer Jeffrey Skilling
Jeffrey Skilling
Jeffrey Keith "Jeff" Skilling is the former president of Enron Corporation, headquartered in Houston, Texas. In 2006 he was convicted of multiple federal felony charges relating to Enron's financial collapse, and is currently serving a 24-year, four-month prison sentence at the Federal...
began advocating a novel idea: the company didn't really need any "assets." By pushing the company's aggressive investment strategy, he helped make Enron the biggest wholesaler of gas and electricity, trading over $27 billion per quarter. The firm's figures, however, had to be accepted at face value. Under Skilling, Enron adopted mark to market
Mark to market
Mark-to-market or fair value accounting refers to accounting for the fair value of an asset or liability based on the current market price of the asset or liability, or for similar assets and liabilities, or based on another objectively assessed "fair" value...
accounting, in which anticipated future profits from any deal were tabulated as if real today. Thus, Enron could record gains from what over time might turn out to be losses, as the company's fiscal health became secondary to manipulating its stock price on Wall Street
Wall Street
Wall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...
during the Tech boom. But when a company's success is measured by agreeable financial statements emerging from a black box
Black box
A black box is a device, object, or system whose inner workings are unknown; only the input, transfer, and output are known characteristics.The term black box can also refer to:-In science and technology:*Black box theory, a philosophical theory...
, a term Skilling himself admitted, actual balance sheets prove inconvenient. Indeed, Enron's unscrupulous actions were often gambles to keep the deception going and so push up the stock price. An advancing number meant a continued infusion of investor capital on which debt-ridden Enron in large part subsisted. Under pressure to maintain the illusion, Skilling verbally attacked Wall Street Analyst Richard Grubman, who questioned Enron's unusual accounting practice during a recorded conference call. When Grubman complained that Enron was the only company that could not release a balance sheet along with its earnings statements, Skilling replied "Well, thank you very much, we appreciate that . . . asshole." Though the comment was met with dismay and astonishment by press and public, it became an inside joke among many Enron employees, mocking Grubman for his perceived meddling rather than Skilling's lack of tact. When asked during his trial, Skilling wholeheartedly admitted that industrial dominance and abuse was a global problem: "Oh yes, yes sure, it is."
Peak and decline of stock price
In August 2000, Enron's stock price hit its highest value of $90. At this point Enron executives, who possessed the inside information on the hidden losses, began to sell their stock. At the same time, the general public and Enron's investors were told to buy the stock. Executives told the investors that the stock would continue to climb until it reached possibly the $130 to $140 range, while secretly unloading their shares.As executives sold their shares, the price began to drop. Investors were told to continue buying stock or hold steady if they already owned Enron because the stock price would rebound in the near future. Kenneth Lay's strategy for responding to Enron's continuing problems was in his demeanor. As he did many times, Lay would issue a statement or make an appearance to calm investors and assure them that Enron was headed in the right direction.
By August 15, 2001, Enron's stock price had fallen to $42. Many of the investors still trusted Lay and believed that Enron would rule the market. They continued to buy or hold their stock and lost more money every day. As October closed, the stock had fallen to $15. Many saw this as a great opportunity to buy Enron stock because of what Lay had been telling them in the media. Their trust and optimism proved to be greatly misplaced.
Lay has been accused of selling over $70 million worth of stock at this time, which he used to repay cash advances on lines of credit. He sold another $20 million worth of stock in the open market. Also, Lay's wife, Linda, has been accused of selling 500,000 shares of Enron stock totaling $1.2 million on November 28, 2001. The money earned from this sale did not go to the family but rather to charitable organizations, which had already received pledges of contributions from the foundation. Records show that Mrs. Lay placed the sale order sometime between 10:00 and 10:20 am. News of Enron's problems, including the millions of dollars in losses they had been hiding went public about 10:30 that morning, and the stock price soon fell to below one dollar.
Former Enron executive Paula Rieker has been charged with criminal insider trading. Rieker obtained 18,380 Enron shares for $15.51 a share. She sold that stock for $49.77 a share in July 2001, a week before the public was told what she already knew about the $102 million loss.
Post-bankruptcy
Enron initially planned to retain its three domestic pipeline companies as well as most of its overseas assets. However, before emerging from bankruptcy, Enron spun off its domestic pipeline companies as CrossCountry Energy.Enron sold its last business, Prisma Energy, in 2006, leaving it as an asset-less shell. In early 2007, it changed its name to Enron Creditors Recovery Corporation. Its goal is to pay off the old Enron's remaining creditors and wind down Enron's affairs.
Azurix
Azurix
Azurix Corp. is a water services company, headquartered in Houston, Texas. The company owned and operated facilities in North America , Europe, and South America...
, the former water utility branch of the company, remains under Enron ownership, although it remains asset-less. It is involved in several litigations against the government of Argentina
Argentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...
claiming compensation relating to the negligence and corruption of the local governance during its management of the Buenos Aires
Buenos Aires
Buenos Aires is the capital and largest city of Argentina, and the second-largest metropolitan area in South America, after São Paulo. It is located on the western shore of the estuary of the Río de la Plata, on the southeastern coast of the South American continent...
water concession in 1999, which led to substantial amounts of debt (approx. $620 million) and the eventual collapse of the branch.
Shortly after emerging from bankruptcy in November 2004, Enron's new board of directors sued 11 financial institutions for helping Lay, Fastow, Skilling and others hide Enron's true financial condition. The proceedings were dubbed the "megaclaims litigation." Among the defendants were Royal Bank of Scotland
Royal Bank of Scotland
The Royal Bank of Scotland Group is a British banking and insurance holding company in which the UK Government holds an 84% stake. This stake is held and managed through UK Financial Investments Limited, whose voting rights are limited to 75% in order for the bank to retain its listing on the...
, Deutsche Bank
Deutsche Bank
Deutsche Bank AG is a global financial service company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets...
and Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
. , Enron has settled with all of the institutions, ending with Citigroup. Enron was able to obtain nearly $20 billion dollars to distribute to its creditors
as a result of the megaclaims litigation. As of December 2009, some claim and process payments are still being distributed.
California's deregulation and subsequent energy crisis
In October 2000, Daniel ScottoDaniel Scotto
Daniel "Dan" Scotto is an American financial analyst. In August 2001, as an analyst with BNP Paribas, Scotto downgraded Enron securities from "Buy" to "Neutral". He took this action four months before the Enron accounting scandal was revealed that led to the company's bankruptcy. Scotto claims...
, the top ranked utility analyst on Wall Street
Wall Street
Wall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...
, suspended his ratings on all energy companies conducting business in California because of the possibility that the companies would not receive full and adequate compensation for the deferred energy accounts used as the cornerstone for the California Deregulation Plan enacted in the late 1990s. Five months later, Pacific Gas & Electric (PG&E) was forced into bankruptcy. Senator Phil Gramm
Phil Gramm
William Philip "Phil" Gramm is an American economist and politician, who has served as a Democratic Congressman , a Republican Congressman and a Republican Senator from Texas...
, the second largest recipient of campaign
Political campaign
A political campaign is an organized effort which seeks to influence the decision making process within a specific group. In democracies, political campaigns often refer to electoral campaigns, wherein representatives are chosen or referendums are decided...
contributions from Enron, succeeded in legislating California's energy commodity trading deregulation. Despite warnings from prominent consumer groups which stated that this law would give energy traders too much influence over energy commodity prices, the legislation was passed in December 2000.
As Public Citizen
Public Citizen
Public Citizen is a non-profit, consumer rights advocacy group based in Washington, D.C., United States, with a branch in Austin, Texas. Public Citizen was founded by Ralph Nader in 1971, headed for 26 years by Joan Claybrook, and is now headed by Robert Weissman.-Lobbying Efforts:Public Citizen...
reported, "Because of Enron’s new, unregulated power auction, the company’s 'Wholesale Services' revenues quadrupled—from $12 billion in the first quarter of 2000 to $48.4 billion in the first quarter of 2001."
Before passage of the deregulation law, there had been only one Stage 3 rolling blackout
Rolling blackout
A rolling blackout, also referred to as load shedding, is an intentionally-engineered electrical power outage where electricity delivery is stopped for non-overlapping periods of time over geographical regions. Rolling blackouts are a last-resort measure used by an electric utility company in order...
declared. Following passage, California had a total of 38 blackouts defined as Stage 3 rolling blackouts, until federal regulators intervened in June 2001. These blackouts occurred mainly as a result of a poorly designed market system that was manipulated by traders and marketers. Enron traders were revealed as intentionally encouraging the removal of power from the market during California's energy crisis by encouraging suppliers to shut down plants to perform unnecessary maintenance, as documented in recordings made at the time. These acts contributed to the need for rolling blackouts, which adversely affected many businesses dependent upon a reliable supply of electricity, and inconvenienced a large number of retail consumers. This scattered supply raised the price exponentially, and Enron traders were thus able to sell power at premium prices, sometimes up to a factor of 20x its normal peak value.
See also
- Enron: The Smartest Guys in the RoomEnron: The Smartest Guys in the RoomEnron: The Smartest Guys in the Room is a 2005 documentary film based on the best-selling 2003 book of the same name by Fortune reporters Bethany McLean and Peter Elkind, a study of one of the largest business scandals in American history...
, an award-winning 2005 documentary film which examines the collapse of the Enron Corporation. - The Crooked E: The Unshredded Truth About EnronThe Crooked E: The Unshredded Truth About EnronThe Crooked E: The Unshredded Truth About Enron is a television movie aired by CBS in January 2003, which was based on the book Anatomy of Greed by Brian Cruver...
, a television movie aired by CBS in January 2003 based on the book Anatomy of GreedAnatomy of GreedAnatomy of Greed is a book by Brian Cruver detailing the Enron scandal from the author's perspective as an employee who worked for the energy giant. In 2002 the book became the first major non-fiction work written about Enron, released by Avalon Publishing in the United States and by Random House...
by Brian Cruver. - Pipe Dreams: Greed, Ego, and the Death of EnronPipe Dreams: Greed, Ego, and the Death of EnronPipe Dreams: Greed, Ego, and the Death of Enron is a book by Robert Bryce and published in 2002 by PublicAffairs with an introduction by Molly Ivins.-Synopsis:...
, a book by Robert BryceRobert BryceRobert Broughton Bryce, was a Canadian civil servant.After graduating with engineering degree from the University of Toronto, Bryce undertook graduate studies in economics at Cambridge, where he was influenced by the ideas of John Maynard Keynes...
. - ENRONENRON (play)ENRON is a 2009 play by the British playwright Lucy Prebble, based on the Enron scandal.-Productions:ENRON premiered at the Chichester Festival Theatre , before London transfers to the Jerwood Downstairs at the Royal Court Theatre from 17 September to 7 November 2009 and then the Noel Coward...
, a 2009 play by British playwright Lucy Prebble. - Dot Com Bubble
External links
- All Enron emails released into the public domain, archived and searchable
- Enron Corporation homepage
- CrossCountry Energy L.L.C.
- Portland General Electric Company
- Northern Natural Gas Company
- "Enron—Legal News Archives" Breaking Legal News
- Enron and the Cult of Personality
- Enron's Code of Ethics
- Enron board records at the Hagley Library
- "The Fall of Enron" HBS Research paper
Data
- Yahoo!: Enron Corp. Company Profile
- Hoovers: Enron Creditors Recovery Corp. Profile
- Google Finance: Enron Creditors Recovery Corp. Profile
- Enron Chronology
- Enron Securities Litigation Web Site (Contains the ENRON historical stock quotes from 1997 to 2002.)